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Old-Line Industry Tools Up With More Advanced Technology Solutions

This article is more than 6 years old.

By Thomas Zadvydas in New York, with additional reporting from Mark Andress in San Francisco.

Old-line industry is getting smarter.

Manufacturing and automotive companies are embracing technology to streamline industrial processes through machine learning, data analytics and device connectivity and are increasingly interested in acquiring or investing in burgeoning tech players working in these areas.

“They are appearing in the fields that are traditionally limited to big IT companies,” says Ian Hughes, senior analyst for the Internet of Things practice at 451 Research. “They are now going to be competing, making plays for things that the IT companies thought were only on their radar.”

Mergermarket data show there were 36 M&A deals in 2017 globally of computer software firms acquired by heavy industrial manufacturers and automotive companies, compared with 23 deals in 2016. Indeed, deals are allowing smart machines to rise.

Sample deals include ABB Ltd.’s April purchase of Austrian industrial IT company B&R for undisclosed terms, Honeywell International’s June move for tech security business Nextnine from Infinity VC and XT Hi-Tech, also for undisclosed terms, and Ford Motor Co.’s $1 billion joint venture with driverless car technology firm Argo AI in February. Ford appointed Jim Hackett, who oversaw Ford’s autonomous vehicle projects, as CEO in May.

Automotive manufacturing companies were mainly interested in autonomous vehicle, cybersecurity and mapping software solutions, as well as mobile computing applications, according to the Mergermarket data.

Smaller companies are also looking for their own buys, notes Adam Schindewolf, business development and marketing manager of Houston-based Technical Toolboxes which generates between $5 million and $10 million in sales. He notes that communities of industrial tech companies have grown up in western European countries such as Belgium and the Netherlands and could provide a greenfield for large buyers looking to enhance offerings like safety monitoring solutions or broaden their international footprint. Technical Toolboxes provides integrated pipeline software suites to assist with pipeline monitoring and research documentation for engineering and technical professionals.

Israeli companies with these solutions have done well serving European customers. One player is industrial analytics technology company Presenso. Haifa-based Presenso was founded in 2015 and has raised about $2 million in funding. Its clients are mainly focused on Europe and include power plants, oil fields and refineries, wind turbines and mining companies.

Presenso provides a platform which analyzes industrial IoT and machine operations data to predict maintenance needs of industrial equipment to prevent damage and breakdowns. A company like Presenso might attract strategic buyers such as General Electric that are interested in strengthening their industrial analytics and internet of things (IoT) presence.

A similar company to Presenso is Sunnyvale, California-based Falkonry, which provides software that analyzes patterns in operational data to identify areas for efficiency improvements. It can also track areas of potential system damage.

Falkonry has clients in the automotive, semiconductor, and heavy industrial spaces, including semiconductors, automotive, mining and heavy manufacturing such as Toyota, ABB and Canadian mining company CINER Resources. The company has raised about $6.3 million in seed funding.

“We’re going to see a lot of these old line industries continue to invest in technology to stay relevant and ahead of the competition,” says Alex Castelli, managing partner at CohnReznick.

Technological advancements in production of industrial components through 3D printing has also garnered interest from VCs and strategics, says Brad Gevurtz managing director at D.A. Davidson & Co. Through this process, a physical object is made from a three-dimensional digital model, typically by laying down many thin layers of a material in succession, allowing for quicker assembly.

A potential VC target in this area is Brooklyn, New York-based 3D printing start-up MakeLab. MakeLab mainly serves architecture, advertising and communications companies with design and engineering, file modification and creation, and 3D printing services. These can be for production of prototypes and housing components for electronics.

On the strategic side, GE has been an active investor in 3D printing companies, investing at least $3 billion in 3D printing since 2010, says 451 Research’s Hughes.

“3D printing, additive manufacturing, lasers, I think those are here to stay,” Gevurtz says.

Zadvydas is a reporter with Mergermarket and Dealreporter based in New York, and Andress is deputy editor of the telecom, media & technology team based in San Francisco.  Zadvydas can be reached at Thomas.zadvydas@mergermarket.com. Andress can be reached at Mark.andress@mergermarket.com.